Martha:

Hello and welcome to this addition of Mobility via Podcast.  I’m Martha Klasing, a Partner in KPMG’s Washington National Tax Practice.  And I’m here again today with Glen Collins, a Senior Manager with our GMS Mobility Consulting Services Group based in Washington, D.C., and Bob Rothery, a Director also in our Washington National Tax Practice and based in San Diego. 

Bob, Glen, a few weeks ago we had a discussion on the topic du jour for many days in a row now and that is COVID-19.  We talked about what governments around the world are doing about it and how organizations are reacting, specifically in the global mobility space.  I’d like to pick that conversation back up again and see what has transpired since we were last together.  When we last spoke a lot of organizations were still in the reaction mode.  The main focus was accounting for all their employees and making sure they were safe. 

The recent conversations on COVID-19 that I’ve been party to, they talk about four phases.  So, reaction, resilience, recovery, and then ultimately, what is going to be the new reality.  So, while certainly I think many organizations are still in this reaction phase, I do get a sense that the conversation may have progressed somewhat.  Glen, KPMG has done a couple of spot surveys with respect to how global mobility function is reacting to the COVID-19 situation.  Can you share some of the key findings from those surveys with us?

Glen:

Sure, Martha.  Our Global Mobility Services Practice conducted two spot surveys in April and the first dealt with the initial implications of COVID-19 on globally mobile employees and we were very pleased that we had over 200 global participating organizations from 24 different industries which is great.  The survey focused on initial reactions by organizations particular to much of the logistical decision making of allowing international studies to remain abroad and follow local company and government guidelines who were bringing those employees and their families who wanted to come home back home, especially from harder hit countries, as we know, and from a policy perspective, decisions regarding associated support for temporarily suspended assignments. And in the second survey which included participation by over 100 global organizations from 30 different industries, we’ve taken a market pulse regarding the effects of COVID-19 particular to total rewards programs.  And their response reflected their organizations’ initial responses to maintaining employment status, potential changes being considered to compensation and benefit structures, and supporting continued work performance through implementing new and more flexible work from home arrangements that so many of us now view as our day-to-day reality.  In addition, we address some of the initial government stimulus and tax relief support that’s now available in the United States, as well as in many other countries that have been hardest hit of COVID-19.

Just a couple of call-outs from the surveys themselves.  The overarching theme from both surveys is that organizations are focusing on safety and wellbeing of their employees first, and this is very critical.  The majority of organizations, they also confirm that they’re not planning to repatriate international assignees at this time, however, nearly all cited that they have provided flexibility and guidance to their assignees to make the best informed decision to remain in the host country, to move to a neighboring less impacted country, or to return home.  Just over half of the organizations report that prospective international assignments and transfers that were scheduled for 2020 have now been put on hold temporarily pending the future outcome of the COVID-19 situation globally.

From a total rewards perspective in terms of COVID-19 related support to employees, just over half the organizations from the survey confirmed that they were tailoring support services, expense coverage, etcetera, by country and/or by job roles or responsibilities, and/or by specific individual needs. 

For organizations with employees that are based outside the United States, clearly close to a majority, 70 percent reported that they are fully aware of benefits available under countries’ social programs for workers on unpaid leave.  And there was about a 50/50 split between organizations having written work from home policy and those not having work from home policies, with just under a half confirming that they are making changes to their work from home policies based on the COVID-19 needs. 

And I’m sure this will continue to develop as we go forward, especially with the reality of the extension stay at home, work from home affecting so many larger cities in the United States as we well know, hopefully seeing relief and rebound in a few countries abroad particularly in Europe, which is great and very positive.  But this may, in fact, become the new reality for so many organizations adapting under this work from home arrangement and expanded scenarios like this. 

A little bit more drill down.  Sixty-two percent are not contemplating any changes to their bonus plan performance metrics at this time.  Some have issued some retention opportunities as well through retention bonuses, etcetera.  Nearly three-quarters of the survey participants are not considering changes to their equity grant strategy at this time.  It’s just another callout from a total rewards perspective. 

Martha:

Excellent.  Thank you, Glen.  And also, KPMG has hosted numerous share forums across the country over the past several weeks.  Are there any key themes or takeaways emerging from those sessions that you’d like to share with us?

Glen:

Yes, there were.  As you mentioned, Martha, we hosted several COVID-19 share forums during the month of April with HR, global mobility, tax, and total rewards professionals essentially to enable organizations to network and understand how how their industry peers are reacting to the many new challenges, but also identifying new opportunities for managing their workforces going forward under these changing world circumstances. Again, similar to the overarching theme from our spot surveys, the big focus is on employee engagement, wellness, and maintaining productivity.  And to achieve that, additional combinations are being offered for work from home arrangements and reimbursing home office expenses, for example.  Most are doing very active outreach and support initiatives, including formal work from home training.  Several also mentioned conducting spot surveys, some employee satisfaction reporting experience type surveys, Slack channels, and Zoom town halls, for example, with breakout sessions.  So, there’s really a lot of very cool, creative, and engaging ideas to continue to engage employees under this work from home scenario.

Next, there have a been a lot of discussions regarding the impact of working from home on future talent mobility, but almost none of the companies believe that the perceived success in the current work from home environment would result in a decrease in future moves such as international assignments and transfers.  There were a couple of organizations who thought that business travel might be viewed as less essential.  And I think that has certainly become a reality.  You know, we’ve seen that from a KPMG perspective in our day-to-day and the ability for us to conduct meetings without face-to-face engagements. 

Others acknowledge that economics might slow moves temporarily and several responded that they believed that the impact of successful work from home arrangements would be felt more in the real estate footprints.  So, making decisions about whether or not maintaining actual office space.  So certainly, we would anticipate that that will be a continuing focus going forward.

And then finally from a tax perspective, as a result of international assignees working back in their home countries, or neighboring countries for that matter, and continuing to provide services to their host country, corporate permanent establishment risks have also been discussed.  However, from the share form most mentioned that they’re putting the PE considerations aside for now and will revisit them depending on the length of the current COVID-19 situation and guidance that would be issued, say, from various tax jurisdictions. 

One organization mentioned that they were sending a reminder email to their cross-border employees to encourage them to continue to track their workdays, for example, to facilitate any future PE residency or individual tax calculations.  And some organizations also expressed global data privacy concerns about asking where employees are working.  It’s also interesting to note that several large employers are in active discussions with various taxing jurisdictions both at the state, as well as the country federal levels.  And some companies mentioned encouraging governments to provide guidance and leniency with respect to work from home situations. 

So, with that said, Bob, do you have any more to add with regards to the corporate PE area?

Bob:

Well, it’s really interesting, Glen, you really hit the nail on the head with respect to the kinds of tax issues that the disruption caused by COVID-19 is causing.  So much of taxation, particularly in the individual sphere, is driven by a person’s presences, and with respect to permanent establishment, what kind of services a person is performing in a given place.  So, because of COVID-19 people are working where they didn’t expect to, doing things they didn’t expect to in places where they are currently sheltering. People are sometimes working longer in a place than they expected, sometimes having had to leave a place sooner than they expected, or they might be working from home which might be in a different country than where they normally perform services.  So, all of these are having an impact on permanent establishment, as well as residency taxation and treaty benefits as well.   So, the OECD did come out with some guidance which many countries are adopting to a greater or lesser extent.  Of course, the (Inaudible) is that every country will see it through its own filter and design their response to the rules in ways that address their tax system.  But many countries are giving guidance on, basically, forgiving permanent establishment issues for the time being, so long as the person’s being retained in a place is temporary and that they haven’t changed the kinds of duties that they were performing and changed their duties in the new country. 

KPMG does have a COVID-19 tax page.  You can just google “COVID-19 tax” and that should come up and from there there’s also a link directly to the global mobility alerts that we have if you’re interested in a specific country and their response to this. The U.S. has reacted to a couple of specific individual tax issues.  First of all, with respect to determination of tax residency, as well as availability of certain treaty benefits, the income from employment or dependent personal services treaty benefits.  Both of those are based on how long a person spends in the US.  So, the Internal Revenue Service has issued guidance in a recent notice that says that up to 60 days of presence in the U.S. can be ignored under certain conditions. 

The rules are a little bit complicated so before you assume that you’ve got 60 free days you should inform yourself or talk to your tax advisor about how that works, but it does give people who are unanticipatedly spending more time in the U.S. than they had intended to, it gives them a little bit of relief with respect still being able to claim a treaty benefit and/or not becoming a U.S. resident because they weren’t expecting to, they weren’t planning to. 

Likewise, the U.S. has also given guidance on Americans who were working abroad and were forced to leave their country where they were posted early before they might have met the qualifying test for the foreign earned income exclusion and has given some relief for that.  Where if a person was forced to abandon their post and return to the U.S. sooner than anticipated, and therefore, didn’t meet the time requirements for that income exclusion they’ll be deemed to have met the time requirements, again, if they meet certain conditions.  So, if this applies to one of your assignees you should absolutely talk to your tax advisor to find out whether this is going to be available.  So Martha, any closing thoughts on anything that we’ve missed?

Martha:

Bob, thanks for that.  Yes, I can imagine we’re going to continue to see developments around the globe in terms of tax issues, immigration issues, etcetera.  And so, we will certainly keep reporting on those.  You know, if we go back to the beginning of March, I don’t think any of us could have imagined that the last two months would have turned out the way they did.  And I think it’s a really big question mark as to how the next couple of months will play out.   But I do think organizations, while still reacting, are either in or entering the resilience phase and they’re starting to look at some of the longer-term aspects of what this means for the future.  On one hand, you could look at this forcing us to get to a place very quickly that we were discussing really theoretically six to nine months ago.  When I think back to our last forum conference, a lot of the discussion was around an employee focus and allowing a workforce to choose where they work whether that be from home, an alternative country where they wanted to live.  And then what does that mean from an organizational perspective and the legal and tax obligations that follow?  And look at where we are now.  That has been fast tracked almost forced and companies are figuring it out.

So yes, hopefully, much of where we are today is a temporary state and we certainly don’t know how long that temporary state may last, but we are entering a new reality and in some respects we’re already there.

So, with that last thought I’d like to close this session of Mobility via Podcast by thanking our audience for joining us again today.  You’ll find links to our COVID-19 information page in the online description of this recording.  In future episodes we will continue to address the top of mind issues of interest to our listeners.  In the meantime, we’d love to hear from you.  If you have any thoughts on today’s episode or ideas for future episodes, please send us an email at us-taxwatch@kpmg.com.  Bob, Glen, great to speak with you again today.  And a final thanks to our audience for listening in.